Young Home Owners in 2012

by Mark Johnston

With the Bank of England’s base rate at an historical low of 0.5% for the last 3 years many young home owners it seem have taken advantage of this.

A study from the Halifax recently found that in January 2012 mortgage payments had reached there most affordable level in 14 years.

Average mortgage payments for new borrowers stood at 27% of disposable earnings in the fourth quarter of 2011, the lowest share since spring 1997 and well below the 37% average over the past 27 years.

The low interest rate has meant that the typical monthly repayment for home owners in their twenties has decreased from an average of £543.92 in 2009 to £471.61 in 2011.

The Consumer Credit Counselling Service (CCCS) said that the number of homeowners aged in their 20s who sought help from the charity had recently fallen sharply. They had dropped from 4,489 in 2009 to 3,008 in 2011.

Other research in to young home owner’s household budgets has also shown that they have gone from having a budget deficit of £15.02 in 2009 to having a budget surplus of £60.42 in 2011.

Data from the Consumer Credit Counselling Service (CCCS) has also shown that only 816 of their clients had mortgage arrears compared with 1,344 in 2009. The charity therefore said that it had seen mortgage arrears almost halved in the past 2 years, amid record low interest rates.

Meaning that most young home owners have taken advantage of cheap mortgage deals that have therefore dramatically improved their household budgets.

Delroy Corinaldi, director of external affairs for the Consumer Credit Counselling Service (CCCS), stated that “while many young adults are struggling to get on to the property ladder, the outlook is more positive for those already on it”.

Nevertheless, many experts have added that this is not a time for complacency for the young home owners as there are multiple pressures attacking being to attack their ability to pay their mortgage and many of these home owners may ‘buckle’ under the pressure of rising interest rates.

One such pressure has recently come from lenders such as theHalifax, amongst others, who have taken the decision amidst the euro zone crisis to raise their mortgage rates. This particular move has affected more than a million borrowers in total so far.

Lenders have also been tightening their lending criteria making further borrowing more difficult, they blame the weak economy and the increased cost of funding a mortgage as reasons for doing this.

Although the situation therefore seems to have improved for young home owners, those who rent their homes are facing more difficulties.

A charity said it had received just over 10,000 requests for help with rent arrears, a 27% rise on request in 2010. It blames the increase on the fact that rents have been rising while earnings have stagnated.

In March 2012 the average rent rose by 0.4% thus making renting 4.2% higher than the same time last year and also it’s most expensive since 2010.


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